IMPORTANCE OF FCRA COMPLIANCE

“statutory damages of up to $1,000 for each applicant, costs and attorneys’ fees, and punitive damages.”

The number of employers that conduct background checks as part of the hiring process has steadily increased. Background checks can help uncover misconduct or dishonest behavior at previous jobs and determine whether applicants possess the positive traits employers desire.

They can also help avoid negligent hiring claims if things go wrong with a new hire. However, a recently filed lawsuit demonstrates that the decision to use background checks should be carefully considered and implemented.

Background

The Fair Credit Reporting Act (FCRA) requires employers to provide applicants with a stand-alone disclosure and authorization form before conducting background checks. The disclosure and authorization form must be separate from the employment application and cannot include language that releases the employer from liability associated with conducting a background check.

Unfortunately, many employers fail to comply with the FCRA by relying on disclosures in employment applications to inform applicants that they will be subject to a background check or by including additional language in the disclosure.

A proposed class action lawsuit against Whole Foods Market California reminds employers to review their disclosure and authorization forms to make sure they comply with the FCRA. The lawsuit accuses Whole Foods of using an invalid form to obtain applicants’ consent to conduct background checks during the application process.

Specifically, the suit alleges that (1) the employer relied on a consent form in an online application that contained other consent forms and (2) the consent form included a release of claims for obtaining a background check. If Whole Foods is found to have used an invalid form, the consequences will be significant.

They may include invalidation of the consent form, statutory damages of up to $1,000 for each applicant, costs and attorneys’ fees, and punitive damages.

Steps to take

The most common mistake is assuming the FCRA only when an employer seeks credit information. Even though the title contains the term “Fair Credit Reporting,” it covers several types of reports.

For example, if a criminal background check is performed by an outside agency instead of the employer, it is considered a “consumer report” and is covered by both laws. Drug testing through a third party may also fall under the terms of the FCRA. If the lab results are sent directly to the employer, it does not fall under the jurisdiction of the FCRA.

If, however, your third party collects the lab results and sends them to you, the FCRA applies! Also, many employers make the mistake of relying on an employment application to inform applicants that they will be subject to a background check.

Again, the FCRA requires employers to provide applicants with a stand-alone authorization form.

Finally, be sure to apply your background check policy consistently. Cherry- picking applicants for background checks or skipping the process for some applicants can expose your company to discrimination or negligent hiring claims.

Strategies going forward

Periodically review your application and hiring forms and processes to ensure strict compliance. In this area, a little care will go a long way.